Keen interest in Bay Area on easing path to China trade
of China’s $723 billion credit card payment market, which had been monopolized by the state-owned China Unionpay Data Co.
In February, China’s government gave the nod to Citigroup to issue credit cards, so perhaps Geithner can raise the flag on behalf of Visa (and Mastercard, American Express and others) as one of the “limitations on market access” issues he hinted he would take up.
“Financial sector reforms are critical to China’s continued growth,” he told the audience at the Mark Hopkins hotel. “And that growth, in turn, represents tremendous opportunities for American companies offering services the Chinese most seek.” Like credit cards, 280 million of which had been issued as of September, a 20 percent increase from the previous year.
One sign of progress: It took a mere 10 months for Silicon Valley Bank, which has had offices in China since 2005, to get approval, in October, for a 50-50 joint venture with Shanghai Pudong Development Bank for financial services. There are some more regulatory hoops to jump through, but the Santa Clara bank, which is investing $75 million in the joint venture, hopes things will be up and running by the summer.
Wells Fargo, which has branches in Hong Kong and Shanghai, with approximately 600 employees, may want to know how long it will take to get the license it applied for last year to start conducting transactions in Chinese currency.
“China is a vital market in the continued growth of Wells Fargo’s international business,” said Richard Yorke, who heads the bank’s international group. Perhaps Wells could be one of the “new private lenders to private enterprises” Geithner noted in reference to a pilot program launched last month in Wenzhou, a city of 9 million people in southeast China.
Competition difficult
But such initiatives will have to get past the economic and political might of China’s stateowned banks and enterprises, an issue Geithner will also take up this week if his words at the Commonwealth Club are anything to go by.
“They monopolize many of the most profitable sectors in China. Their implicit backing by the Chinese government discourages private firms’ entry and expansion, (and) hurts U.S. companies and workers who compete with these firms,” he said.
Geithner will get little argument from Chinese leaders on many of the points he makes. Premier Wen Jiabao, for example, has said much the same thing (except the bit about U.S. companies and workers). But like Washington, Beijing is preoccupied with a game of musical political chairs this year. The changes Geithner wants to see, he admits, are at best years away.
“It’s hard to tell how the reform process will play out,” Geithner said. “We’ll have to wait until the end of the year to see how the transition (in China) plays out.”
The obstacles to progress in the United States seemed to be of far greater concern to Geithner. “Congress has a hard time doing things that are overwhelmingly popular,” he said in one of the lighter moments. “We don’t want to distract them.” (Laughter and applause from the 500-strong audience.)
Asked what his biggest concern is for the U.S. economy, Geithner, more seriously, replied: “It should be a dominant concern of Americans as to whether the political system we have in this country, in a country so divided, is going to be able to start doing things,
Geithner was quick to add that U.S. challenges are far less than those of other countries around the world — including China. “What looks strong in China is not as strong as it seems,” he said. Not sure how that remark will go down in his meetings with Chinese leaders, but whether it’s true or not, Geithner was right to place the emphasis closer to home.
“The solutions to our challenges rest first and foremost in the policies of Washington, not of Beijing,” he said. “Fundamentally, how many jobs and how much wealth we create will be the result of the choices we make in the United States — not the choices of others.
“I try to be an optimist,” Geithner concluded. “It’s important to be an optimist about this country.”